Awareness of financial issues, especially on the personal front is minimal even among highly educated professionals, including quite a few "Finance Professionals". This blog is intended to be of some value addition to anyone who cares about his/her personal finance. The focus will be on the Indian situation, though the principles will be applicable the world over..... (Please read the disclaimer at the bottom of this page without fail)

Sunday 8 March 2009

I think his patience is his greatest key to success. He has waited out recessions of all lengths, market crashes, and international crises. When he goes in, he goes in for five years or more. And that ability is what has played a big role in making him a truly successful investor.

You see, long-term investors have the greatest odds of success. In his classic, More Than You Know: Finding Financial Wisdom in Unconventional Places, Michael Mauboussin details how long-term investing is an essential part of being a successful investor. Mauboussin, the Chief Investment Officer of Legg Mason, looks at investment success from a purely mathematical perspective.

He focuses on the probability of success relative to time. As you might expect, the longer someone holds a stock, the greater his odds of success.

For instance, the odds of coming out ahead on a trade with a holding period of one hour is about 50/50 (that's before commissions too). The odds of a one month holding being profitable is only slight better at 56%. After a year odds increase 72.6%. After ten years, the probability of success soars to 99.9%.

Buffett, as a true long-term investor, has got probability on his side. And that's one of the first steps to being successful in anything.

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About the Author

The author is Naren, an independent thinker presently based at Chennai, India. Naren has an opinion on a range of issues. Will keep expressing them from time to time for the perusal of the world at large! He loves to receive feedback (Especially positive ones!) This blog will focus on matters pertaining to the wide world of finance, investments, thrift, etc. While reading, he'd like you to enjoy this blog and use its inputs effectively after reading the disclaimer at the bottom!

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